My Lords, just under two weeks ago in the other place, the Chancellor set out a Budget to define the UK’s future. It was a Budget which acknowledged the fundamental strengths of the UK economy, responded to immediate challenges and laid the foundations for an economy that is fit for the future. It is a privilege to present this Budget to your Lordships’ House today.
The Budget demonstrated the underlying strength and resilience of the British economy, which has grown over the past year by 1.5% and has now expanded for 19 consecutive quarters. Employment has risen by 3 million since 2010 and is close to a record high, with a near record number of women in work as well. The unemployment rate has fallen as well, to its lowest level since 1975.
This is all very welcome; however, there remain challenges that need to be addressed. In particular, productivity growth remains stubbornly low. Accordingly, the independent Office for Budget Responsibility has revised downwards the outlook for productivity growth across the forecast period. This has a direct impact on its forecast for GDP growth, which the OBR now predicts to be lower in every year of the forecast period compared to that forecast in March this year. As a consequence, business investment is expected to remain subdued, while inflation is set to peak at 3% this quarter before falling back towards the target over the next year. The Budget therefore takes action to support households and businesses in the near term while investing further to improve productivity and drive future growth in the medium to long term.
The Government have made significant progress since 2010 in restoring the public finances to health, but borrowing and debt remain too high. The Government’s fiscal rules take a balanced approach, getting debt falling while continuing to invest in our key public services and keeping taxes low. The OBR reports that, having taken into account the new forecast and the measures presented in this Budget, the Government are on track to meet both their interim fiscal targets during the forecast period. It is in this context that this Budget seeks to address the future challenges and opportunities for the UK, embracing change while providing immediate support for people, businesses and our public services where it is needed most.
This Government have already set in train a series of long-term reforms to deliver real improvements in growth. We have seen more than a quarter of a trillion pounds of public and private investment in our infrastructure since 2010. We are overseeing the biggest rail programme since Victorian times, and we are  transforming skills through apprenticeships and the launch of T-levels at the previous Budget.
In this Budget, the Government have taken further steps to increase our long-term prosperity through investing in the skills and infrastructure needed to compete in future. The national productivity investment fund introduced last year will be extended to 2022-23 and funding will be increased to £31 billion. The fund will support an additional £2.3 billion investment in R&D, taking total R&D spend in 2021-22 to £12.5 billion. That is the largest public-sector R&D investment programme over the past 40 years. This will be alongside an increase in the R&D expenditure tax credit from 11% to 12%, an ambition to create the most advanced regulatory environment in the world and further funding to roll out fibre-optic broadband and 5G networks across the UK.
The Government are also committed to using funding from the national productivity investment fund, along with other transport spending, to boost regional infrastructure. Plans include an ambitious strategy to maximise the growth in the Oxford to Cambridge corridor through projects such as the completion of the east-west rail that will connect Oxford to Cambridge by train. The Budget also announced an action plan to unlock £20 billion of new investment in high-growth, innovative businesses in response to the patient capital review.
On skills, the Budget invests £406 million in maths and digital skills to help everybody get the skills they need to succeed in a modern economy. These efforts are complemented by the industrial strategy, which set out a clear plan for how we can boost the productivity and earning power of people throughout the UK and ensure that our country can embrace and be empowered by the excitement of technological change.
We speak about the infrastructure our businesses need to thrive, but we also need to talk about the infrastructure people need to survive. Increasing the supply of housing in the right places supports productivity improvements. It encourages a flexible labour market and enables people to work where they can be most productive, but, more importantly, providing homes is key to building communities and giving families the stability and security they deserve. Yet home ownership has become increasingly unaffordable, with the average house price in England and Wales now almost eight times the average person’s salary, compared to 3.6 times two decades ago. The number of 25 to 34 year-olds owning their own home has dropped from 59% to just 38% over the past 13 years.
So the Budget sets out an ambition to deliver 300,000 homes a year, supported by a comprehensive package of planning reforms and targeted investment. It commits over £15 billion of financial support to boost housing supply over the next five years, bringing the total amount of support to £44 billion over this period. It makes proportionate planning reforms, focused on urban areas where people want to work and live, helping towns grow in the right way while protecting the green belt.
But we also want to take action right now to help young people who are saving for a home, so the Budget permanently removes the up-front cost of  stamp duty for over 95% of first-time buyers. This is a comprehensive plan that will deliver on the pledge that we have made of ensuring that the dream of home ownership becomes a reality for the next generation once again.
The Budget is committed to ensuring that we have the foundations in place to support growth in the long term, but it also recognises that there are immediate challenges caused by rising prices. So the Budget will boost wages, reduce the cost of living and support businesses by freezing fuel duty, reducing the burden of business rates by a further £2.3 billion, increasing minimum wages and increasing the personal allowance to £11,850, lifting some 1.2 million out of tax altogether.
Finally, I turn to our public services and the taxes we need to pay for them. I take the opportunity to point out that this is the second Budget this year. The investment this Budget provides to core parts of our public services builds on the previous funding that the Government set out, such as the additional £2 billion we invested in social care in the spring Budget. The Budget takes further steps to put the NHS on a strong, sustainable footing, with £6.3 billion of additional funding, of which £3.5 billion will be invested in upgrading NHS buildings and improving care, while £2.8 billion goes towards improving A&E performance, reducing waiting times for patients and treating more people this winter. This is a significant first step towards meeting the Government’s commitment to increase NHS spending by a minimum of £8 billion in real terms by the end of this Parliament.
The Budget also commits an extra £3 billion to prepare for Brexit over the next two years, to make sure the Government are ready on day one of exit.
On welfare, the Government are committed to building a modern welfare state that is sustainable, in which work always pays and claimants are supported to increase their earnings. That is why the Government are continuing to roll out universal credit, which delivers long-overdue reforms to the welfare system. However, the Government recognise the genuine concerns raised in many places, including in your Lordships’ House, about the operational delivery of universal credit. In response, they are introducing a £1.5 billion package of measures to address those concerns.
The Government are clear that everyone must pay their fair share of tax in order to support our vital public services. The actions taken by this Government since 2010 have secured a £160 billion in additional tax revenue that would have otherwise gone unpaid, and brought the UK’s tax gap down to 6%—its lower level ever and one of the lowest in the world. The Budget will continue to collect tax due, with a package of measures that is forecast to raise £4.8 billion by 2022-23.
A sustainable tax system also needs to keep up with developments in the wider economy. The Government recognise that the development of the digital economy creates imbalances between those firms with and those without a physical presence. This is not sustainable. Therefore, the Budget sets out how the UK will ensure that all businesses—both digital and bricks and mortar—operate on a level playing field within the corporate tax system.
In summary, the Budget takes sensible actions in the light of revised forecasts to address the some of the key challenges and opportunities that lie ahead, and in doing so, lays the foundations for a prosperous future. It invests sustainably in our public services, while supporting people and businesses and continuing to invest to secure a bright future for Britain. I commend it to your Lordships’ House.

Lord Bates: My Lords, I thank all noble Lords for their contributions to this extraordinarily good debate. It has focused on all the issues, which tended to coalesce around five themes which I will direct my remarks to: housing; social care and the NHS; living standards and social mobility; business and industrial strategy; and Brexit. It has been good for me and my noble friend Lord Young to have the benefit of all the contributions, but I will single out those from my noble friends Lord Balfe and Lord Dobbs and the noble Lords, Lord Goddard and Lord O’Neill of Gatley. I do so because they began with an optimistic outlook. I confess that I am an optimist: my blood group is B-positive. I am afraid I  am drawn to that concept. If the House will indulge me I will take a few minutes to point to the many good things that are happening.
I begin with the noble Lord, Lord O’Neill of Gatley, who has a distinguished record and made observations on the global economy. His forecast—which I trust very much—was that the economy might grow by as much as 4%. If it does, and you take the global economy as somewhere between $70 trillion and $80 trillion, I make that growth of the size of the United Kingdom economy being added to the world economy this year. There is therefore a huge opportunity out there for us to tap into. The noble Lord, Lord Horam, talked about export potential and there is an example of it. The world is growing, markets are growing and most of the fastest-growing markets are outside the European Union. That global strategy therefore strikes a chord.
We should also remember that employment is up by over 3 million, with over 32 million people in work. The noble Lord, Lord Balfe, referred to the hard-working people of this country. The challenge that we face is to add to their hard work increased productivity—which I will come on to later. Unemployment is down by over 1 million since 2010. The unemployment rate has not been this low since 1975. We had lots of nostalgia in this debate, not least for Led Zeppelin and Dusty Springfield. Even Lord George-Brown had a look in among the distinguished figures from the past, including Lord Whitelaw and Lord Healey, the latter’s Budget debate being the first to which my noble friend Lord Wakeham contributed. I believe it was also the first Budget for my noble friend Lord Young.
The noble Lord, Lord O’Neill, mentioned the northern powerhouse and the growth taking place in the regions. It is worth mentioning—the noble Lord, Lord Goddard, echoed this—that employment numbers are growing faster in the north-west than anywhere else in the country. That is something to welcome. It is not happening by accident; it is happening because of a designed policy—a long-term economic plan to rebalance the economy.
We have cut income tax for over 30 million people, taking 4 million people out of income tax altogether. We have frozen fuel duty for eight years in a row, saving the average car driver £850 since 2010. Last month we doubled free childcare, which is worth £5,000 a year to families—an issue referred to by my noble friend Lord Farmer. We have also invested in 3.4 million apprenticeships. The noble Baroness, Lady Kramer, and the noble Lord, Lord Rooker, speculated as to whether the investment plans would be manifested. So far since 2010, we have invested £500 billion in infra- structure projects and have delivered 1,000 such projects.
At the same time, we have seen corporation tax for small businesses—a concern of my noble friend Lord Wakeham—go down from 28% to 19%, making it one of the lowest tax rates in the G20. An interesting point in looking at the yield from corporation tax is that, as the noble Lord, Lord Darling, will recognise, it is not just the tax rate that counts but the tax take. When we had a corporation tax of 28%, the revenue was about £43 billion a year. With a current tax rate of 19%, the amount of money being brought in is close to £50 billion.  Therefore, although the rate has come down, the take has gone up. Should any opposition party be foolish enough to postulate that reversing that beneficial and benign occurrence of falling taxes and rising revenues would somehow be a way to reduce the deficit, I suggest that it might not be the way forward.
Perhaps I may address some of the points that were raised concerning international attitudes towards this country. The noble Lord, Lord Lea of Crondall, talked about foreign direct investment here. The UK remains the leading foreign direct investment recipient in Europe, attracting a record total of 1,144 financial foreign direct investment projects since 2016—an increase of 7% over 2015. So people here may be losing confidence in themselves but it is noticeable that the world is not losing confidence in Britain. With our world-class universities, our incredible market and our technical abilities, the UK attracted $254 billion in 2016, second only to the United States.
At the launch of the industrial strategy, referred to by the noble Baroness, Lady Randerson, we also celebrated two major new investments in cutting-edge pharmaceutical companies—MSD, which will develop a research facility in London by 2020 aimed at finding new drugs, and Qiagen, a leading diagnostics company, which, partnered by Health Innovation Manchester, will develop genomics and diagnostics at its campus in the city. Facebook announced just today that it will create another 800 new jobs in the UK in 2018, and not quite the low-skilled jobs that some noble Lords referred to. Toyota announced a £240 million investment to upgrade its car plant in Derbyshire, Rolls-Royce announced a £150 million investment in UK aerospace, and BMW will build a fully electric version of the Mini in the UK. All these are foreign investments in the UK. They express a belief in the United Kingdom and what we, the people of the United Kingdom, have to offer. That point was touched on by the noble Lord, Lord Skidelsky, who then rightly asked us to focus on the importance of investment. I will come to that point first.
In the Budget, we proposed that an increased amount will go into the productivity investment fund. This will bring investment in R&D to its highest level in over  40 years—again, another welcome forecast.
The OBR forecast that the UK contribution to the EU, net of public sector receipts, will be £7.7 billion over 2017-18. This figure does not include receipts received by the private sector.
On the points raised by my noble friend Lord Maude, obviously he did a tremendous amount of work in raising activity across the public sector during his time as Cabinet Minister in the Cabinet Office. The figure he quoted of £50 billion saved in the delivery of front-line services has made a tremendous difference to the working of government and to the impact on our financial position. My noble friend Lady Neville-Rolfe said that we ought to maintain pressure on this and not let up, because the battle was not won, and she is right that we should focus on that.
Perhaps one of the most inspiring contributions was from my noble friend the Duke of Wellington, who talked about the King’s College maths pilot school. Of course, we recognise that if we are to compete in the world and attract more foreign direct investment  of the type we are talking about, building more tech companies in this country, we need to attract high- quality maths teaching. That is why we announced in the Budget that we will invest £42 million in a pilot teacher development premium. We will also triple the number of fully qualified computer science teachers from 4,000 to 12,000, raising maths attainment packages through a support plan. I am happy to convey my noble friend’s recommendation of the noble Baroness, Lady Wolf, who was behind that particular school, and I commend them for their work.
A number of noble Lords referred to social mobility issues: the noble Lord, Lord Tunnicliffe, the noble Baroness, Lady Donaghy, my noble friend Lord Farmer and the noble Lord, Lord Skidelsky. It is worth recognising at this point that some other things are of note. The number of young people from the most disadvantaged areas who attend universities has increased to its highest level on record—19.5% for England—and, as my noble friend Lord Balfe mentioned, income inequality is down to its lowest level. The noble Baroness, Lady Donaghy, referred to the impact of the Budget on women; in April 2016 the gender pay gap for full-time employees decreased to 9.4%, and there are record numbers of women in the workplace.
On comments by the noble Lords, Lord Lennie, Lord Beecham, Lord Goddard and Lord Shipley, particularly on the north-east of England, people who work in that area will benefit from an ambitious devolution deal in the north of Tyne area, covering Newcastle, North Tyneside and Northumberland, which will give them greater freedom—which my noble friend Lady Eaton called for—to get on and do the work they are supposed to be doing on investment and looking after their local communities. That will be worth a significant amount—£600 million over the next 30 years or, more precisely, £20 million per year. There is also the mayor of Tees Valley’s initiative on the SSI site, to which the noble Lord, Lord Lennie, referred as well as the investment in rolling stock on the Tyne and Wear Metro, which again is something that should be welcomed and shows that investment and prosperity are heading out across the UK.
I turn now to universal credit. The right reverend Prelate the Bishop of Portsmouth referred to that and the measures that were being taken. We are ensuring that households that need it and have an underlying entitlement to UC will have access to a month’s worth of support within five days via interest-rate-free advances. Universal credit is paid monthly and in arrears to mirror the world of work. We have listened to representations from your Lordships’ House, among others, and have made changes that will continue with the principle but ease the impact as the programme is rolled out.
Housing was raised by my noble friends Lord Ryder and Lord Horam, the noble Lords, Lord Darling and Lord O’Neill of Clackmannan, and the noble Baroness, Lady Blackstone. The issue that we have at the moment is one of unaffordability. The noble Baroness, Lady Kramer, referred to the issue of supply. Of course it is about supply, which is one reason why we have announced the housing White Paper, Fixing Our Broken Housing Market, and announced a whole series of initiatives  within that package of £15.3 billion about how we release more sites for development. That is entirely a supply measure. The housing infrastructure fund at £5 billion is a supply measure. Oliver Letwin has been asked to undertake a review about the situation referred to by the noble Lord, Lord Shipley, and my noble friend Lord Ryder where developers are granted planning permission but do not go on and build the houses that are necessary. That is looking at blockages in the supply area. It has to be seen that the focus is not just on demand, such as the measure on stamp duty; there are supply measures as well.
The noble Lord, Lord Beecham, and my noble friend Lord Horam referred to the Homelessness Reduction Task Force. That has been established to develop a cross-government strategy with the initial focus on delivering a commitment to halve rough sleeping by 2022 and eliminate it by 2027. There will be three housing pilots—the first in Greater Manchester, the next in the West Midlands Combined Authority and then another in the Liverpool City Region.
The noble Lord, Lord Campbell-Savours, asked about online VAT fraud and how HMRC will implement and monitor it. HMRC has discretionary powers that it will use on a case-by-case basis where there is clear evidence that a UK business trading via an online marketplace is not complying with VAT rules. Compliant UK sellers who are legitimately trading below the VAT registration threshold or are VAT registered correctly accounting for all VAT due will need to be addressed in this particular context. The requirement to display a valid VAT number applies to those companies that are provided with one.
My noble friend Lord Balfe asked whether we could introduce a surcharge on foreign-owned empty residential properties. The Government are keen to encourage owners of empty properties to bring the properties back into use, which is why the Budget announced we will give the power to local authorities to increase the council tax premium on empty homes from 50% to 100%.
The noble Lord, Lord Ryder, asked about stamp duty and observed its impacts on the housing market. Stewart Baseley, executive chairman of the Home Builders Federation, has said that first-time buyer’s relief will provide the certainty of demand to allow builders to invest with confidence, directing and increasing supply.
The noble Baroness, Lady Young of Old Scone, asked about housebuilding measures and whether they will have a negative impact on standards. The Budget confirms the Government’s commitment to maintain existing green belt protections. We are consulting to make sure that minimum densities are set at the right level for all concerned, including local people who will live in the homes. I will take her suggestion of green villages back to the Treasury, if I may.
My noble friend Lady Neville-Rolfe and the noble Baroness, Lady Randerson, asked about railway investment, Heathrow, local roads and the national planning infrastructure fund. That £1.7 billion fund will be used for transport in cities. It is spread across   the regions, with £250 million for the West Midlands, £243 million for Greater Manchester and £377 million for the north-west for intra-city transport.
The right reverend Prelate the Bishop of Portsmouth asked about UK defence. The UK will meet the NATO target to spend 2% of GDP on defence. In the 2015 spending review, the defence budget was protected and increased by 3.1% in real terms until 2019-20.
The noble Lord, Lord McKenzie of Luton, referred to debt falling only due to the housing association reclassification. My answer is no: we would have met the fiscal targets in 2021, regardless of the change to the classification of housing associations.
The noble Lord, Lord Tunnicliffe, asked whether deficit reduction has failed, to which the answer is no, it has not. Of course, we inherited a deficit of 9.9% of GDP in 2009-10; that has been reduced to 2.3% in 2016-17.
The noble Lord, Lord Livermore, questioned whether we will reach the Government’s targets. In November 2017, the OBR forecast that the Government will meet both their fiscal targets for this Parliament. The deficit is forecast to be 1.1% of GDP in 2022-23—the lowest level since 2001-02—and debt is forecast to peak in 2017-18 at 86.5% of GDP, then fall every year of the forecast period to 79.7% in 2022-23.
My noble friend Lord Balfe asked about tax avoidance and evasion. Since 2010, we have introduced 100 measures, including in this Budget, to tackle tax avoidance and evasion. As a result, the tax cap is now at its lowest level and is one of the lowest in the world—some 6% of the total forecast.
I come to social care. The noble Baroness, Lady Bakewell, asked me to ensure I mention social care in my winding-up speech. I am happy to do that, as I mentioned it in my opening speech. There is a critical element that we need to bear in mind. One of the most staggering statistics we have come across is that there are some 15,000 centenarians living in the UK. From the population in this country living now, that figure will rise to some 10 million. Therefore, the issue to address in social care is intergenerational fairness, which was referred to, and the impact on areas such as those mentioned by my noble friend Lord Freeman, including pension funds. Those are vast concerns that will have to be addressed over the long term and reflected on. There will have to be Green Papers and discussion papers. Some £2 billion was announced in the Spring Budget. That will have to be kept closely under review in the light of any Green Paper.
I think I have addressed a number of the questions, though I am sure not all the points raised. In conclusion, I simply say that this is a Budget that invests in the infrastructure, skills and technology we need to succeed while providing immediate support where it is needed the most.